MIAMI – Shares of Canadian tour operator Transat jumped as much as 30% on Tuesday. The increase was due to Air Canada’s (AC) revised buyout offer. This raised optimism the once-shaken deal by the COVID-19 pandemic would now be completed.
According to Reuters, on Saturday, AC reduced the offer to buy Transat by nearly 75% to about C$188.7m (US$143.86m), down from C$720m (US$547.98m). With the pandemic grounding flights globally, AC faced mounting shareholder pressure to renegotiate the deal. European and Canadian regulators are still reviewing the offer.
Analysts said the revised price would give AC greater motivation to conclude the deal.
Analysts and Stakeholders Comments
“COVID-19 has resulted in significant uncertainty for the airline industry,” said Desjardins analyst Benoit Poirier in a note to clients on Tuesday. He noted that there had been doubt whether the combination of Transat and AC would even occur. “We believe the revised agreement offers incentives for AC to obtain regulatory approvals for the transaction,” he concluded.
Letko Brosseau, the largest shareholder in both companies, according to Refinitiv data, was not immediately available for comment, said Reuters.
One portfolio manager who holds Air Canada stock said he believes Transat shareholders will have little option other than to approve it. “What are the alternatives?” asked the manager who spoke on the condition of anonymity. “This is the best that they are going to get in this environment.”
A vote on the deal by Transat shareholders is scheduled for early December.
Featured image: Air Transat A310 YUL. Photo: Patrick Cardinal